The Central Bank of Kenya’s Monetary Policy Committee (MPC) has lowered the Central Bank Rate (CBR) by 25 basis points to 9.50%, the seventh consecutive cut since November 2024 and its lowest level since May 2023.
- •The MPC noted that Kenya’s overall inflation stood at 4.1% in July, up slightly from 3.8% in June, and remains below the mid-point of the 5% ± 2.5% target range.
- •Real GDP expanded by 4.9% in the first quarter of 2025, driven by strong agricultural output and recovery in industrial activity, particularly construction.
- •The MPC said the rate cut builds on earlier easing to further stimulate credit to the private sector and support economic activity, while ensuring inflation expectations remain anchored.
Core inflation rose marginally to 3.1%, while non-core inflation increased to 7.2% due to higher energy prices. The Committee expects inflation to stay below the mid-point in the near term, supported by stable food and energy prices and a steady exchange rate.
- •Projections point to GDP growth of 5.2% in 2025 and 5.4% in 2026, underpinned by services, agriculture, and continued industrial recovery. The MPC cited risks from global trade policy uncertainties and geopolitical tensions but noted an overall improved outlook, with global growth revised up to 3.0% for 2025.
External and Financial Sector Conditions
Kenya’s current account deficit narrowed to 1.6% of GDP in the 12 months to June 2025 from 1.8% a year earlier, supported by higher exports of horticulture, coffee, vegetable oil, and clothing accessories, as well as a 12.1% rise in diaspora remittances. Foreign exchange reserves stand at USD 10.96 billion, equivalent to 4.8 months of import cover, providing a buffer against shocks.
The banking sector remains stable, with adequate liquidity and capital buffers. The gross non-performing loans (NPL) ratio held at 17.6% between April and June 2025. NPL declines were recorded in building and construction, manufacturing, and personal lending, while trade and tourism-related sectors saw increases.
Private sector credit growth improved to 3.3% in July from 2.2% in June, supported by falling lending rates, which averaged 15.2% in July compared to 17.2% in November 2024.
